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Venture Capital Funds

Definition

Venture capital is a type of private equity, a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth. Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake, in the companies they invest in. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as information technology, clean technology or biotechnology.

What are 'Venture Capital Funds'

Venture capital funds are investment funds that manage the money of investors who seek private equity stakes in startup and small- to medium-sized enterprises with strong growth potential. These investments are generally characterized as high-risk/high-return opportunities. In the past, venture capital investments were only accessible to professional venture capitalists, although now accredited investors have a greater ability to take part in venture capital investments.

Explaining 'Venture Capital Funds'

Venture capital is a type of equity financing that gives entrepreneurial or other small companies the ability to raise funding. Venture capital funds are private equity investment vehicles that seek to invest in firms that have high-risk/high-return profiles, based on a company's size, assets and stage of product development.

The Operation of a Venture Capital Fund

Venture capital investments are considered either seed capital, early-stage capital or expansion-stage financing depending on the maturity of the business at the time of the investment. However, regardless of the investment stage, all venture capital funds operate in much the same way.


Further Reading


Venture capital's role in financing innovation for economic growth
www.sciencedirect.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

The structure and governance of venture-capital organizationsThe structure and governance of venture-capital organizations
www.sciencedirect.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

Sources of funds and investment activities of venture capital funds: evidence from Germany, Israel, Japan and the United KingdomSources of funds and investment activities of venture capital funds: evidence from Germany, Israel, Japan and the United Kingdom
www.sciencedirect.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

Convertible securities and optimal exit decisions in venture capital financeConvertible securities and optimal exit decisions in venture capital finance
www.sciencedirect.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

Financial contract design in the world of venture capitalFinancial contract design in the world of venture capital
www.jstor.org [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

What is the effect of the financial crisis on venture capital financing? Empirical evidence from US Internet start-upsWhat is the effect of the financial crisis on venture capital financing? Empirical evidence from US Internet start-ups
www.tandfonline.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

Venture capital and the finance of innovationVenture capital and the finance of innovation
papers.ssrn.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

The role of venture capital in the creation of public companies: Evidence from the going-public processThe role of venture capital in the creation of public companies: Evidence from the going-public process
www.sciencedirect.com [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …

The syndication of venture capital investmentsThe syndication of venture capital investments
www.jstor.org [PDF]
… Google Scholar. Tektronix, 1978 TektronixVenture Capital: A New Ventures Technique for Industrial Firms. (1978). Google Scholar. Timmons et al., 1985 JA Timmons, LE Smollen, ALM Dingee. New Venture Creation (2nd ed.) (1985). Homewood, Ill …



Q&A About Venture Capital Funds


What does it mean when an investment has high risk and high return?

It means that the investment has a chance for large profits but also carries the possibility of large losses.

What is venture capital?

Venture capital is a type of equity financing that gives entrepreneurial or other small companies the ability to raise funding.

Who manages venture capital funds?

Venture Capital Funds are managed by professional investors who have experience in this area.

What are some examples of private equity investments?

Private equity investments include startup and small- to medium-sized enterprises with strong growth potential.

How do you get venture capital funding?

You can get venture capital by investing in a private equity fund.

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